In theory, Pennsylvania recognizes a duty in every contract for both parties to act with the utmost good faith and to engage only in fair dealing with one another.
In practice, these claims rarely succeed, like a week ago in the United States District Court for the Eastern District of Pennsylvania:
Pennsylvania law recognizes an independent cause of action for breach of the duty of good faith and fair dealing only in "very limited circumstances," such as insureds’ dealings with insurers and franchisees’ dealings with franchisees. Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 91 (3d Cir. 2000) (citing Creeger Brick and Building Supply, Inc. v. Mid-State Bank and Trust Co., 560 A.2d 151, 153-53 (Pa. Super. Ct. 1989). In Northview Motors, the United States Court of Appeals for the Third Circuit predicted that Pennsylvania courts would limit the application of claims for breach of the covenant to situations where they were "essential" and would not recognize an independent cause of action for breach of the covenant where the parties had entered into a detailed contract setting forth their obligations and rights. Id.; see also McHale v. NuEnergy Group, 2002 WL 321797 at *8 (E.D. Pa. February 27, 2002) (finding that "Pennsylvania law would not recognize a claim for breach of [the] covenant of good faith and fair dealing as an independent cause of action" where the allegations underlying the breach of covenant claims are "essentially the same" as those underlying the plaintiff’s claim for breach of contract).
The Court similarly finds that Pennsylvania would not recognize an independent claim for breach of the covenant of good faith and fair dealing in this case. As in Northview Motors, the parties here entered into a detailed contract setting forth their rights and obligations with respect to the purchase of the property at issue. The facts that Sentry Paint alleges give rise to its claim for breach of the implied duty of good faith and fair dealing are the same as those that form the basis for its breach of contract claims. Under these circumstances, Sentry Paint’s breach of covenant claims are subsumed in its breach of contract claims and cannot be maintained as a separate cause of action. Fn 20:
Fn 20: In support of its separate cause of action for breach of the covenant of good faith and fair dealing, Sentry Paint cites to the Pennsylvania Supreme Court’s decision in Birth Center v. St. Paul Co., 787 A.2d 376 (Pa. 2001) and the decision of the Lawrence County Court of Common Pleas in Harlan v. Erie Ins. Group, 2006 WL 1374502 (Lawrence Co. CCP February 16, 2006). Both Birth Center and Harlan involved contractual bad faith claims by an insured against an insurer, one of the "limited circumstances" in which Pennsylvania recognizes an independent cause of action for breach of the covenant of good faith and fair dealing. Neither case supports recognizing an independent cause of action here in an action involving an arms-length purchase of property.
Sentry Paint Techs. v. Topth (EDPa, October 31, 2008, McLaughlin, J.).
C’est la vie. Hard to know what their damages would be anyway in this case, if not damages arising out of a breach of the explicit terms of the contract. To me, outside of those quasi-fiduciary situations described above, the "good faith and fair dealing" seemed like a catch-all where it was hard to prove exactly what the breach was, except for a bad faith failure to perform.
But don’t despair, business plaintiff trial lawyers — this case was at summary judgment, so you can even use it in support of alleging the claim in your complaint when they file a motion to dismiss or motion for judgment on the pleadings.